III. Language

Exercise 3. Find in the text and put down English equivalents to the following word combinations:

Рівень ризику; купувати фінансові інструменти; прибуткові доходи в формі відсотків; домогосподарство; збільшення вартості; депозитний рахунок; можливість отримання прибутку; заробляти більше грошей; ціни мають тенденцію зростати; акції корпрацій; періодичні виплати; отримати прибуток від продажу; не отримати нічого за кінцевим рахунком; потенційні збитки; безпечне та диверсифіковане інвестування; запобігти негативним наслідкам.

Exercise 4. Fill the blanks with the suitable words:

1. Destinations for invested money include…, stocks, bonds, mutual funds and numerous other investment options.

(current accounts, cooperatives, savings accounts)

2. Because … tend to rise over time, the value of money gradually decreases

(interest rates, prices, costs)

3. …is not only an opportunity to make more money, but it is the only way to protect the money that you already have

(investing, insurance; bank loan)

4. Investors share in a corporation`s profits by receiving periodic payments – dividends.

(financial stability; income; history)

5. Safe and diverse investments may slow…, but they also prevent negative consequences.

(investment activity, inflation effect, the pace of returns)

Exercise 5. Make up the possible word combinations out of the following and translate them:

Investing compound financial saving pension mutual corporate

instruments derivatives interest activity account option stock funds

Exercise 6. Match the definitions to the economic terms in the left column:

dividends investing inflation time value of money compounding

a). the addition of interest to a principal sum causing money to increase in value exponentially over time; b). periodic payments received by investors owning stocks of a corporation; c). increase in the value of an investment.; d). the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns; e). the effect when the value of money gradually decreases;

IV. Text understanding

Exercise 7. Find in the text and translate a passage describing:

1. the meaning of investing.

2. the concept of “time value of money”.

3. the interaction between investing and inflation.

4. the notion of compounding.

5. The difference between investing and gambling.

Exercise 8. Agree or disagree with the statements:

1. Investing is not related to saving.

2. Determining yield is one of the most important factor in any investing activity.

3. Destinations for invested money include savings accounts, stocks, bonds, mutual funds and numerous other investment options.

4. Investing is not considered the way to protect the money that a person already has.

5. One of the main benefits associated with many investments is compounding.

6. If the corporation prospers over the years, its stock will have unchanged value.

7. Safe and diverse investments prevent negative consequences

Exercise 9. Answer the questions:

1. What does the term “investing” mean?

2. What areas of the economy is investing involved?

3. What is the most important factor in any investing activity?

4. What are the main destinations for invested money?

5. Why is there a risk associated with not investing the money that you already have?

6. What is inflation?

7. What is dividends?

Exercise 10. Make up a plan covering the main ideas. Discuss the text according to the plan.

Exercise 11. Read and translate:

Text B

Stocks

As a shareholder, you stand to profit when the company profits. As a rule, the better a company does and the higher its profits, the more money its stockholders make. Investors buy stock to make money in one or both of two ways:

• Trough dividend payments while they own the stock.

• By selling the stock for more than they paid.

Many companies parcel out portions of their annual profits to stockholders in the form of dividend payments. Dividend payments vary from stock to stock. Stocks with consistent histories of paying high dividends are known as income stocks because investors often buy them for the current dividends rather than for the company`s future prospects. Some companies, however, reinvest most of their profits back into the business in order to expand and strengthen it. As a result, companies that pay little or no dividends are called growth stocks because investors expect the company to grow – and the stock price to grow with it.

How do you judge a company`s prospects? By current or anticipated earnings, the desirability of its product or service, the competition, availability of new markets, management strength and many other considerations.

Unofficially there are four tires of stocks in the market:

Foremost are the blue chips, the older generation, the elite of industry, the companies of unquestioned strength, like IBM and AT&T. The term blue chips was introduced in 1904 to mean the stocks of the largest, most profitable corporations. The term comes from the blue chips used in poker – always the most valuable chips.

Secondary issues are the solid, well-established businesses which receive a little less investor confidence than the blue chips. Both blue chips and secondary issues are income stocks.

Growth stocks generally are relatively young companies with growth potential but no assurance of success.

Penny stocks are small companies with virtually no value other than their speculative potential.

Notes:

Income stocks – компанії, акції яких купують заради отримання дивідендів;

Growth stocks – перспективні компанії, що розвиваються;

blue chips – «блакитні фішки» - найбільші та найстабільніші компанії на фондових ринках;

Secondary issues – стабільні компанії середнього рівня;

Penny stocks – маленькі нестабільні компанії, часто створені для спекулятивних цілей.

Exercise 12. Match types of stocks with advantages and disadvantages of investing in them.

Advantages	Types of stocks	Disadvantages
a). The price of stocks can quickly rise at a very high rate;		j).The price of stock is usually very high.
b) your profit is always stable;		k). the high level of risk; stocks can loose their value
c). your investment risk is minimized;	Income stocks	l).it is impossible to sell your stock for much more money. The price is normally stable.
d). you can sell your shares for much more money than you bought them		m). you receive no periodic payments
e). owning such stocks is very prestigious;		n) you can loose all your money in the case of a company`s bancruptcy.
f). the initial price of stock is fairly low	Growth stocks	o). you can`t participate directly in the management of a company
g). such investing gives you good analytic experience.
h). you have limited liability
i). such investing is a long-term commitment of capital.

Exercise 12. Read the text. Explain the essence of FDI and name advantages it can give to a country using USA as an example. Think about spheres of Ukrainian economy that are the most perspective for investing either domestic or foreign. Give your reasons and ideas.

Use phrases: in my opinion, to my mind, I`d rather say that, in fact, there`s no doubt that, furthermore, frankly speaking, according to.

FDI or Foreign Direct Investment is any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor. FDIs require a business relationship between a parent company and its foreign subsidiary. Foreign direct business relationships give rise to multinational corporations. For an investment to be regarded as an FDI, the parent firm needs to have at least 10% of the ordinary shares of its foreign affiliates. The investing firm may also qualify for an FDI if it owns voting power in a business enterprise operating in a foreign country.

Benefits of FDI

The United States is the world’s largest recipient of foreign direct investment. In 2007 alone, the United States received $237 billion in FDI. Foreign direct investment impacts the U.S. economy in many positive ways. For example, FDI:

Creates New Jobs: U.S. affiliates of foreign companies (majority-owned) employ approximately 5.3 million U.S. workers, or 4.6% of private industry employment. Between 2003 and 2009, over 4,500 new projects were announced or opened by foreign companies, yielding over $314 billion in investment and about 632,500 new jobs.

Boosts Wages: U.S. affiliates of foreign companies tend to pay higher wages than other U.S. companies. Internationally owned companies support an annual U.S. payroll of $364 billion, with average annual compensation per employee of over $68,000. On average, U.S. subsidiaries of foreign firms pay 25 percent higher wages and salaries than that of all U.S. establishments.

Increases U.S. Exports: U.S. companies use multinationals’ distribution networks and knowledge about foreign tastes to export into new markets. Approximately 19 percent of all U.S. exports ($195 billion) come from U.S. subsidiaries of foreign companies.

Strengthens U.S. Manufacturing and Services: Thirty percent of the jobs supported by U.S. affiliates of foreign companies are in the manufacturing sector, accounting for 12 percent of all manufacturing jobs in the United States. Approximately 60 percent of all foreign investment in the United States is in the service sector, improving the global competitiveness of this critical segment of the U.S. economy.

Brings in New Research, Technology, and Skills: Affiliates of foreign companies (majority-owned) spent over $34 billion on research and development in 2006 and $160 billion on plants and equipment.

Contributes to Rising U.S. Productivity: Inward investment leads to higher productivity growth through an increased availability of capital and resulting competition. Productivity is a key factor that increases U.S. competitiveness abroad and raises living standards at home.

Exercise 13. Tell about investing using the plan:

1. The definition of investing.

2. The areas of economy investing is involved in.

3. Destinations for invested money and the main factor in investing activities.

4. The concept of “time value of money”

5. Inflation and investing.

6. Compounding.

7. Investing in corporate stocks.

8. Dividends.

9. FDI in global economy.